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JAMB Commerce 2001 Question 27

Question 27

Insurance

The major difference between insurance and assurance is that while insurance

  1. A.takes care of uncertainty, assurance takes care of risks
  2. B.takes care of risks, assurance takes care of uncertainty
  3. C.hinges on probabilities, assurance is based on possibilities
  4. D.is about indemnity, assurance is about life in the future.
Show the answer and explanation

Answer: D (is about indemnity, assurance is about life in the future.)

Explanation

Insurance covers risks that may or may not happen and pays only the actual loss (indemnity). Assurance covers life, where death is certain to come, so the sum assured is paid in the future without measuring a loss.